Why Salaried Individuals Must File Their ITR Before Time

As a salaried individual, you may have received your Form 16 (which includes Part A and Part B) by now. Plus, your Account Information Statement (AIS) and Form 26AS may have been updated by now. Usually, by mid-June, these statements and forms are fully updated on the income-tax portal.

Other than the aforementioned statements and forms, gather all other documents you need to file your ITR, such as...

• Bank passbooks/statements to report and pay tax on income other than salary

• Form 16A (applicable for tax deduction at source other than income from salary)

• Form 16B (the TDS certificate in case of income from the sale of property)

• Form 16C (the TDS certificate in case of rental income from property)

• Form 16D (the TDS certificate in case you, the assessee, have received commissions, brokerage, contractual fees, and/or professional fees under Section 194M of the Income Tax Act, 1961)

• Proof of tax-saving investments made into Public Provident Fund (PPF), National Pension System (NPS), National Saving Certificates (NSC), Sukanya Samriddhi Yojana (SSY), 5-year tax-saving bank fixed deposits, Equity Linked Saving Schemes (ELSS) or tax-saving mutual funds, etc., eligible for deduction u/s. 80C of the Income Tax Act

• Home loan tax certificate, wherein the principal amount of the EMI is eligible for deduction u/s. 80C and the interest component u/s. 24(b)

• Education loan interest certificate (in case you have availed of this loan, is eligible for a deduction u/s. 80E of the Income Tax Act)

• Proof of life insurance and health insurance premiums paid, eligible for deduction u/s. 80C and 80D, respectively.

• Capital gain account statement for mutual funds and shares (to avails of set off and carry forward of loss as per the provisions of the Income Tax Act).

• Donation receipts (in case you have made donations during the financial year that qualify for a deduction u/s. 80G)

Keeping all these documents ready will ensure the correct computation of your Net Taxable Income (NTI) and the tax demand thereon.

The IT Department, as you may know, has launched a new ITR filing portal-www.incometax.gov.in/iec/foportal.

This portal is aimed at providing you, the taxpayer/assessee, with a seamless experience and convenience in filing your income tax.

Some of the attractive features of the new ITR portal are:

• User-friendly and built to immediately process ITRs as well as issue quick refunds

• Integrated with free ITR preparation software available online and offline with interactive questions to help taxpayers fill the ITR form even if you, the assessee, have no tax knowledge, with prefilling for minimising data entry effort.

• A new call centre to assist you, the taxpayer, with immediate answers to your tax queries. Plus, there are FAQs, tutorials, videos, and chatbot/live agent.

• A single dashboard for you to view and see all the interactions and pending actions with follow-ups to be done. You can view all the notices, orders, submissions, and updates pertaining to your PAN and communicate with the tax department on signing in.

• New payment options such as net banking, UPI, Credit Card, and RTGS/NEFT from any account of the taxpayer in any bank for easy payment of taxes

• A pre-validated bank account for income-tax refunds

• Electronic verification (using Aadhaar-based OTP or electronic verification code or digital signature certificate), saving you the trouble of sharing the physical copy of the duly signed ITR-V to the Central Processing Centre (CPC) in Bangalore

• A National Faceless Appeal Centre (NFAC) to facilitate the centralised conduct of appeal proceedings

In addition, the IT Department also launched a new Aaykar Setu app (available for Android devices on Google Play and App Store for iOS-backed Apple devices).

So, make use of the efficient online facility and file your ITR much before the due date. The key benefits of filing the ITR much before the due date are as follows:

1) You Get enough time to be organised for the ITR filing process and minimise errors - Although the new tax filing portal may have simplified the ITR e-filing process, do not undermine the time required to collate the data from all documents/forms/certificates to e-file your ITR.

Moreover, if you find any discrepancy in these documents, you will be able to bring it to the notice of the person responsible for filing the statement and get it corrected before filing the ITR. Thus, it minimises the risk of errors and penalties thereto for inaccurate reporting.

2) Time to rectify the mistakes - In case you or your tax return preparer or consultant or Chartered Accountant (CA) make a mistake for some reason despite the correct information in the AIS and/or Form 26AS or inadvertently skipped reporting certain sources of income; you would be able to able to verify and rectify those mistakes well before the due date. Keep in mind, that the Central Board of Direct Taxes (CBDT) has reduced the time limit for ITR verification to 30 days from the date of return submission (from the earlier 120 days).

3) Avoid the technical glitches on the portal - Closer to the due date, there could be technical glitches cropping up on the tax filing portal due to server overload. Several requests are on the server closer to the tax filing deadline, which can be frustrating and add to the time taken to process the returns, and possibly undue stress and penalties. To avoid making it a taxing experience and in the interest of your health and wealth, file your ITR much before the due date.

4) Avoid late ITR filing penalty - Not filing your ITR by the due date shall attract a late filing penalty/fee of Rs 5,000 u/s. 234F of the Income Tax Act if the returns are filed after August 1, 2024.

However, in cases where the total income does not exceed Rs 5 lakh in the assessment year, this late ITR filing penalty/fee is Rs 1,000. If the total income is below the basic exemption limit, there isn't a late filing penalty/fee.

Over and above the late filing penalty/fee, you, the assessee, will be charged interest u/s. 234A for the delay in filing the return @1% per month or part thereof on the tax due until the payment of taxes. The interest will be charged right after the due date, i.e., July 31, 2024, till the tax is paid.

To avoid doling out late filing penalties and interest, which ultimately adds to the tax outgo, consciously file your ITR well before the due date. But if it is a case of tax refund, there is no penalty for filing the return after the deadline.

5) Faster processing of tax refunds - If you have a tax refund, your ITR may get processed faster, provided you file your claim in advance. If you delay e-filing your ITR, the refunds (if any) may also get delayed due to the rush. Remember, refund processing usually takes more time than processing forms with a tax due. When you are expecting a sizeable amount of tax refund against the ITR filed, always make it a point to e-file your ITR much before time.

If you file your ITR later, the tax refund may get delayed - and in such a case there is an opportunity cost involved. The tax refund can be deployed by you to save money for a rainy day and/or wealth-creating avenues.

6) Faster processing of loans, visas, and credit cards - Just like many of your personal documents (such as address proof and photo ID), your ITR is an important income proof. If you are considering applying for a home loan, car loan, or a premium credit card or planning to make any other big financial decision backed by credit, your last-filed ITR will mostly be required. Similarly, when you plan to travel abroad, for visa formalities, your latest ITR may be called for. Hence, file your ITR on time.

7) Carry forward and set off capital losses against capital gains - The Income Tax Act allows set off and carry forward of capital losses against capital gains. This provides you, the assessee, the opportunity for 'tax loss harvesting'. By setting off the realised capital loss against the realised capital gains during the financial year by indulging in tax loss harvesting, you could reduce your tax liability.

The unadjusted capital losses can be carried forward up to 8 years, for both Short Term Capital Loss (STCL) as well as Long Term Capital Loss (LTCL). If you file your ITR before the due date, you will be able to carry forward these capital losses to the ensuing assessment years, otherwise, this provision will not be available to you.

8) Provide a better perspective to engage in tax planning in the current financial year - Filing your ITR much before the due date could help you recognise certain financial or tax planning mistakes committed in the previous assessment year (relevant to the financial year). No matter how low your income may be or from only a few sources, you could engage in tax planning better this year facilitating you to legitimately save tax.

Filing tax returns on time -- much before the due date -- will save you the horror and embarrassment of being served tax notices, prosecution, and imprisonment.

Salaried individuals have the option to choose between the Old Tax Regime and the New Tax Regime when filing the ITR. If you don't choose, the New Tax Regime will be the default tax regime.

Note, the Old Tax Regime, allows you to avail of several exemptions under Section 10 and a host of deductions under Chapter VIA of the Income Tax Act, 1961. In all, over 70 exemptions and deductions can be availed under this regime facilitating you to reduce your net taxable income and tax outgo.

On the other hand, the New Tax Regime is devoid of many of the exemptions and deductions that are available under the Old Tax Regime. Only full tax rebate on total income up to Rs 7 lakh in the financial year, standard deduction of Rs 50,000 on salary income, deduction for family pension (Rs 15,000 or 1/3rd of the actual pension received, whichever is lower) and leave encashment exemption (for non-government employees), can be claimed under the New Tax Regime.

Hence, choose wisely between the Old Tax Regime and the New Tax Regime and file your ITR before the due date. As regards, the forms to file ITR, by and large, for salaried individuals, ITR-1 (SAHAJ) is applicable. But for a detailed view and to know which would be specifically applicable to you, click here.

Paying your taxes on time is a constitutional and moral duty, which as a law-abiding citizen, you must comply with.

"In this world, nothing is certain but death and taxes." - Benjamin Franklin.

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Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and use such independent advisors as he believes necessary.